Why women need to overcome their fear of money and how to do it
Does managing your finances scare you? Do you procrastinate meeting with an advisor because of the shame you feel around money?
Finances can be scary! Studies show that one in three women are concerned about their finances, compared to only one in five men. In fact, many women feel unprepared to manage their finances on their own, and, statistically speaking, most will have to learn. Women are currently getting married older, staying single, or outliving their spouse, making it vitally important for women to make smart money decisions.
In addition, while nobody wants to think about the prospect that they’ll wind up getting divorced, statistics tell us that this is a very real possibility. Commonly cited statistics say that 41% of first marriages, 60% of second, and 73% of third marriages end in divorce in the U.S. Taking personal responsibility for your financial security, with or without your spouse, should be a high priority for all of us. Even if you remain happily married, the average age of widowhood is 59, according to the U.S Census Bureau. The majority of women will be forced to become completely responsible for their financial welfare at some point in their lives. This is a sobering wake-up call that, at some point, we will all need to get clued in about our finances – and preferably sooner rather than later.
The fear of money can reach phobia status for some, even coining its own medical term, chrometophobia.
For many women, the fear of money is only natural, since we fear things we do not understand. Women learn so much about healing and restoring other aspects of our lives – such as relationships, body image, parenting – and yet we often feel too intimidated to tackle anything having to do with our finances. We are afraid of not having enough money, of losing what we have, and we’re even afraid of having more than we need.
How can we find serenity amid all that financial angst? We can start by learning about money with this simple four-step money management process.
Assess Your Financial Situation. Start by calculating your net worth. Make a list of your assets and liabilities (debts). Your assets are everything you own, from the value of your home to the cash in your bank account. Your liabilities include the value of all of your debts, which may include a mortgage, auto or student loans, and credit card balances. Your net worth is, essentially, the total of all your assets minus your liabilities. Your net worth can be an extremely useful tool in measuring your economic status and overall financial progress from year to year.
Repeat this process once a year and compare it with the previous year’s number. By comparing the two, you can then determine if you are making progress toward growing your net worth.
Budget and Cut Costs. Financial security is not possible if you do not know where your money goes. You’ll live and spend from day to day with no clear idea of how much money is moving in and out of your accounts. To help you get on top of your spending, follow these steps:
- Create a worksheet so you can analyze where your money goes.
- Figure out where your money was spent over the last 12 months.
- Create your budget for the coming year.
- At the end of each month, see how close you came to your estimated budgeted amounts.
A favorite online money-management website is Mint.com. Mint allows you to easily track all your accounts: checking, savings, credit cards, mortgage, and investments. Plus, signing up is fast and free. The website can monitor your accounts for you and connects to more than 7,500 U.S. financial institutions. Mint updates all your accounts at least once a day, and automatically labels each expense with a category – groceries, credit-card payments, taxi, etc. You can use customized tags to create more detailed categories, to make the website even more useful for you. They have colorful pie charts breaking your expenses down to keep track of your spending categories, which makes budgeting even easier. Mint.com also allows you to create savings goals and helps you track your progress.
Get Educated. Getting educated about your money is crucial to securing your financial independence. A great way to start learning about your money is to talk about it with your spouse, family members or friends. We need to stop thinking about money as a taboo subject and start to realize that money is empowering and vital to our future security. Like everything else in life, being money savvy takes practice. There are thousands of resources out there to help you learn more about budgeting, weeding out unnecessary expenses, saving, and investing. Books, magazines, blogs, podcasts, and even some TV shows are a great way to start getting more exposure to financial concepts you might be unfamiliar with. The more you know about money, the less you have to fear. The less you fear, the more you will be open to learning!
Ask for Help. If you have a financial advisor, be sure to attend all of your meetings and demand that you get the attention you deserve. A study by Fidelity Investments found that when couples interact with a financial advisor, men are 58 percent more likely than women to be the primary contact. If your advisor refuses to acknowledge you as an important part of this relationship, change advisors. If you don’t have an advisor, talk to a colleague or friend who has more experience with personal finance, or consider talking to a financial planner who can help you build a roadmap to achieve your financial goals.
You can visit the National Association of Personal Financial Advisors website (www.napfa.org) to get a list of fee-only financial planners in your area. Roughly, 5,000 of the roughly 310,000 financial advisors in the U.S. are just brokers, who are paid to sell expensive financial products to you in return for a fee. It is in your best interest to look for a fee-only, independent Registered Investment Advisor (RIA) and in fact, only 1.6% of advisors work this way.
When it comes to most things in life, we never want to settle for second best. Why would you settle when it comes to your money? And why continue to be afraid of money, when money can be your tool to feeling financially secure?